For newbies looking into ZEN Here is a post by a respected poster on SI:
As for targets for zenyatta, here's a pretty easy 'back of the napkin' for comparison:
They have about a 5% grade. I'll use 3.33%
Revenue/tonne for Sri Lankan vein/lump graphite (upgraded) said to be $8-10,000. I'll use $7500
Zenyatta has some massive intercepts on their discovery drill holes. Truly, the lengths of intercept indicate that they aren't just drilling into a usual 'vein structure'. You can't hit veins like that at length, not with a straight drill hole. Their mineralized target is almost 1km by 1km. I've seen cautious guesstimates of 10-30M tonnes of ore, although a few deep holes could prove those to be hyper-conservative. I agree that using 10-20M tonnes ore is conservative.
So, if it takes 30 tonnes at 3.33% to get one tonne worth $6000 ($7500 less $1500 upgrade costs) = $200/tonne ore. That's an insitu resource of $200 x 10-20M = $2-4B. You can expect a market cap range of 1-10% insitu resource value for 'a resource idea'.
Lots of different factors determine where a company can get positioned within that kind of range:
Geopolitics. Canada = higher than average range.
Required capex. Low = higher than average range.
Insitu value (less than $1B =low; $1-5B middle of range, $5B+ = high). $2-4B = middle range.
$ Value per tonne ore (less than $50 = low, $50-100 middle, $100+ = high) $200 = higher than average range.
Promotional ability. Looks like Zenyatta management is very well tuned into this side of equation. = higher
Promotional appeal. Looks like graphite has always been expected to become 'sexy'. = higher.
There are other factors too like share structure, management team, overall market conditions, etc.
At this stage, we only have enough info to carve out an 'idea' of value. We owe it to ourselves to try. So:
Before drill results come back, Zenyatta is going to get lots of public interest. You can already see that in the stock price movements, and the recent increase in volume. It looks like the (imagined) insitu resource value deserves a market cap on the high end of:
Insitu resource = $2-4B multiplied by 1-10% range = $20M - $400M marketcap. With 60M shares out, that gives a possible shareprice range of $0.33 - $6.60. Everything except current market conditions points towards being healthily on the high side of that range. The midpoint is $3.50. I don't think the stock price even pauses until it gets there. Whipsaws like this week don't count, apparently. If 40-50 cent pulls don't shake out that many shares, it'll go higher and then really pull. There will be a bigger pull (like $1) well before the pre-drilling excitement. Because this'll hit 2/3, 3/4, or 5/5 of that $6.60 upward limit on account of drill result anticipation, and someone needs to shake you out of your position.
Would you really want to be outside this stock if they come out with 40 million tonnes of 4% ore? 100M tonnes of 5%? Look what that does to the insitu value.
When is this getting drilled? Once Zenyatta announces the drilling timeline, we'll know. Starting jockeys, get your positions (sorry, Zenyatta was the name of a horse after all).
OK, I can hear it now (not from Chief, who understands this type of model, but from the inevitable naysayers): "Where do you come out with this model of insitu value implying marketcap range?" Show me any resource investment play that doesn't prescribe to this model, and then we talk.
So I guess we agree, sort of. My back of envelope calculations point towards targets of $3.50 short term (within two months) and then $4.20, $5.00 (likely) or $6.60 (over-hyped) before drilling results get announced.
Current price of $2.16 means market cap fully diluted = $125M.
Please, do your own dd. Think for yourself. Never listen to anything I have to say, I can't spell, or even drive very well if you listen to my wife. Anyone trys to drill me later cause they bought this or that based on these bits or those, whatever. This is not meant to entice anything other than good dialogue. Let's see: full disclosure, yes I bought some. No, I don't get paid by anyone to post messages, and I don't ever recommend to anyone that they buy venture stocks. Seek adventure, and you'll get adventure.
Haitokin